The close: TSX falls as North Korea tensions spur flight to safety
Canada’s benchmark stock index fell on Wednesday as heightened tensions between North Korea and the United States drove investors away from higher-risk assets and toward safe havens, such as gold.
Valeant Pharmaceuticals International, and the heavily weighted financials group lead broad declines.
Valeant’s stock, which rallied a day before following quarterly results, sank 9.6 per cent to C$17.85 after it said its subsidiaries in Australia were the subject of a tax audit.
Overall, the healthcare sector slumped 3.4 per cent. Some of Canada’s biggest banks were also influential decliners, but closed with only moderate losses.
Manulife Financial Corp was down 1.1 per cent to C$25.64. The umbrella financials group slipped 0.3 per cent.
Investors are losing enthusiasm for Canada’s banking stocks as a slowdown in the country’s housing market dents banks’ growth prospects, with insurance companies seen as a better bet to benefit from higher interest rates.
The Toronto Stock Exchange’s S&P/TSX composite index fell 39.02 points, or 0.26 per cent, to end at 15,217.33. Of the index’s 10 main sector groups, seven finished in the red.
The index’s losses mirrored global markets, which fell after incendiary words between the United States and North Korea. President Donald Trump said on Tuesday that U.S. threats from Pyongyang would be met with “fire and fury,” which prompted North Korea to say it was considering plans for a missile strike on the U.S. pacific territory of Guam.
“People are concerned that a shouting match could lead to someone pressing a button,” said Irwin Michael, portfolio manager at ABC Funds. But Michael said the overall market was still expected to saw-tooth its way higher due in part to a batch of better-than-expected earnings and low interest rates, despite the shift toward raising rates. “We do believe the trend is still up.”
Energy stocks retreated 0.5 per cent, despite higher oil prices.
Information technology fell 1.24 per cent, hurt by a 16.6 per cent plunge to C$66.50 in Kinaxis Inc stock. Kinaxis shares fell after the supply chain management software maker cut its forecast.
Offsetting the declines was a 0.4 per cent gain by the materials group, which includes gold producers. The precious metal miners benefited from the flight to safety, with bullion prices hitting near two-month highs on North Korean worries.
Franco Nevada Corp rose 3.9 per cent to C$95.65, while Barrick Gold Corp was up 1.9 per cent at C$21.26.
Declining issues outnumbered advancing ones on the TSX by 161 to 87, for a 1.85-to-1 ratio on the downside.
S&P closes barely lower despite North Korea tensions
U.S. stocks clawed back losses late on Wednesday as investors appeared to brush off geopolitical concerns after falling in the wake of U.S. President Donald Trump’s “fire and fury” warning to North Korea.
Bargain-seeking investors instead turned their focus to strength in the global economy and earnings toward the end of an active trading day.
“It’s amazing when you consider the headlines just how calm the equity markets are, how they’ve taken things in their stride,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
“There was some skittishness earlier but then some buyers stepped in,” he said.
Investors had rushed to safe-haven assets after strongly worded exchanges between Washington and nuclear-armed North Korea late on Tuesday. U.S. Secretary of State Rex Tillerson said he did not believe there was an imminent threat.
“You’d need to see something more tangible than just rhetoric for a broader pullback,” Richard Steinberg, managing director at HighTower Advisors in New York.
After a dip of as much as 0.52 per cent earlier in the day, Wall Street’s three major indexes bounced off intraday lows.
The Dow Jones Industrial Average <.DJI> fell 36.64 points, or 0.17 per cent, to end at 22,048.7, the S&P 500 <.SPX> lost 0.9 point, or 0.04 per cent, to 2,474.02 and the Nasdaq Composite <.IXIC> dropped 18.13 points, or 0.28 per cent, to 6,352.33.
While gold <XAU=>, a safe-haven favourite, pared some gains it was last up 1.2 per cent at around its highest since mid-June, while the Swiss franc <CHF=> and the Japanese yen <JPY=> also rose.
Politics lifted U.S. defence stocks. Lockheed Martin <LMT.N>, Raytheon <RTN.N>, General Dynamics <GD.N> and Northrop Grumman <NOC.N> all rose and the Dow Jones U.S. defence index <.DJUSDN> was up 1.6 per cent after hitting a record high.
The CBOE Volatility Index <.VIX>, the most widely followed barometer of expected near-term stock market volatility, ended at a session low of 11.11 after rising as high as 12.63.
Six of the S&P 500 sectors ended higher. The consumer discretionary index <.SPLRCD> was one of its biggest losers with a 0.47 per cent drop. Its biggest drags were Priceline <PCLN.O> and Walt Disney <DIS.N>.
Disney shares closed down 3.9 per cent as investors were skeptical of its plan to launch streaming services rather than rely on Netflix <NFLX.O>.
Travel website operator Priceline Group Inc <PCLN.O> fell 6.9 per cent after a disappointing financial forecast.
Declining issues outnumbered advancing ones on the NYSE by a 2.29-to-1 ratio; on Nasdaq, a 2.47-to-1 ratio favoured decliners.
About 6.48 billion shares changed hands on U.S. exchanges on Wednesday compared with the 6.16 billion average for the last 20 sessions.
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